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Gold, in India, today hit an all-time high as the rupee continued with its downward spiral against the US dollar. The yellow metal breached its previous high of Rs 32,464 made on November 26, 2012, to hit a record high of more than Rs 33,600 per 10 grams.While the gold in US dollars terms is still way down from all-time high of $ 1,920 an ounce, the Indian markets have run up on the back of rupee weakness,

Gold in the last two months has not only recovered the 20 per cent it lost in 2013 but also gained 6 per cent over it.

With the global gold prices headed into bull territory and the Indian price in unchartered territory, some more strength is expected from here on. Bullion traders expect prices to breach Rs 35,000 this week itself.

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The government continues to scapegoat precious metals.If you are coming in late,do read this previous post to catch up,Link.Today the government increased import duty on gold, silver and platinum to 10 per cent ostensibly to arrest the declining value of Indian Rupee and contain the fiscal deficit to 3.7 per cent of the GDP.The customs duty on standard gold and platinum has been raised from 8 per cent to 10 per cent and on silver from 6 per cent to 10 per cent.

The results of this action in the domestic price of these metals is to be found in the picture.

Gold prices might have fallen in Dollar terms,but the falling Rupee has ensured that domestic gold prices are rebounding.And the duty burdens are helping elevate prices.

Its common sense that a relentless price rise,creates its own market.So even if the government is right in believing that gold is the cause of our misery,pushing up its price in Rupees is unlikely to lead to a fall in gold demand.

Also do read what Jim Rogers says about the price of gold here:Link.If he is right in his assessment of price rise,and he has a habit of being right about trends,just not timing.Is discouraging gold purchase by Indians such a good Idea?And is the government going to be able to prevail?Or will this be as useless as the RBIs attempt to prop up the Rupee?And is it really worth incentivizing people to attempt to smuggle gold and consume smuggled gold?

If you believe that there is something to be gained to by keeping your ears open to bazaar gossip,here is the on-dit in Mumbai’s wholesale gold market:

The international slowdown in gold prices has hit India in a significant way. Investors are disappointed and look to sell at the earliest opportunity.The current scenario does not make for a buyer’s market. People are waiting for prices to drop further. The sale of exchange-traded funds (ETFs) and short-selling by investors has contributed to the decline.

A correction was in order given the astronomical rise in bullion over the past few years.Its the same for silver as well. This could be good news for retail buyers with the wedding season coming up in May.

May 13 is Akshay Tritiya, which may witness a drop in sales. The prospect of a free fall in prices will prompt buyers to defer non-essential purchases until Dhanteras, when prices could be even lower at round 22000-23000 Rupees per 10 grams.

Certainly,going by the subdued responses to the Siddhivinayak Mandir‘s gold auction for drought relief on the 11th i.e, Gudi Padwa, there is reason to be cautious.Small buyers were on a strict budget and the devotees who regularly make the big purchases were uninterested and absent.